Labour Markets Still Searching for Momentum

Employment was largely unchanged in October, following consecutive declines in August (-42,000) and September (-68,000). The unemployment rate edged up 0.2 percentage points to 6.7 per cent, while the employment rate fell 0.1 percentage points to 60.5 per cent, marking its third consecutive monthly decline.

Key insights

Canada’s labour market is struggling to find momentum. So far this year, employment has declined in 6 of 10 months with the only sustained run of gains recorded between May and July. This volatility also characterized labour markets in 2025, as the U.S.-Canada trade dispute weighed on the economy. In August, the United States imposed a steep 50 per cent tariff on roughly $28-billion worth of Canadian goods, dealing another blow to an already battered manufacturing sector and clouding the export outlook for the second half of 2026. Escalating trade tension with the U.S and the breakdown of trade negotiations will continue being a drag on labour markets this year. With trade negotiations now appearing set to restart sooner than later, especially following the mid-term election results, there is some room for optimism, but a failure to reach a trade deal will prevent any meaningful and lasting rebound in employment over the coming months.

Between January and October, employment In Canada declined by 21,100. However, the modest decline masks significant differences in provincial labour market performance. Quebec has accounted for the bulk of the losses, shedding 122,900 jobs over the period. After holding relatively steady last year, the province’s labour market has come under increasing pressure amid heightened economic uncertainty related to U.S. tariffs. Ontario has also been heavily exposed to the trade dispute, but its labour market has been much more resilient, with employment rising by 69,900 jobs this year. Nova Scotia’s labour market has also held up quite well, recording a gain of 18,300 jobs, further highlighting the uneven distribution of employment growth across the country.

As economic conditions improve, demographic trends will become the main drivers of labour markets. In Budget 2026, released yesterday, the federal government largely maintained its goal to reduce migration intake in the country and lower population growth over the next few years. Given Canada’s aging population and rising retirements, low population growth risks putting significant downward pressure on the unemployment rate and create more persistent labour shortages across many sectors of the economy, particularly health care, construction, and the skilled trades.